Despite the enumerated advantages of MIGA’s non commercial risks insurance guarantee program, deficiencies in the scope and contents of its guarantee program, particularly 1) absence of corruption and consumer conflicts (consumer resistance to private investor participation in water supply services) risk insurance and 2) absence of development based due diligence and risk assessment (DDRA) strategies, stifles ability to enable private investors to invest in the water sector in African nations. Regarding scope, since MIGA’s inception in 1988, it has not provided risk insurance guarantee to private water investors to encourage participation in the delivery of water services in Africa, a continent that is plagued by negative perceptions and realities of rampant corruption and consumer conflicts. There are also problems with infant mortality, poor health conditions and stunted industrial and economic development from inadequate access to clean water. In Sub-Saharan Africa alone, some 769,000 children under 5 years of age die annually from water borne (diarrhea) diseases in 2000-2003. According to the African Development Bank (ADB), nearly 40 percent (about 300 million people) of Africa’s 784 million people do not have access to clean water supply and adequate sanitation facilities.
Although there are no accurate statistics on the financial losses to private investors from corruption and consumer conflicts in global water projects; it is undisputed that the amount, however great or small threatens their economic existence and are sufficient to deter them from participating in the delivery of such services in Africa. World Bank Institute and Interpol experts estimate that more than US$1 trillion dollars is paid in bribes alone each year in various sectors on a global scale. The institute calculated this figure using 2001-2002 economic data. Interpol determined that the figure compares with an estimated size of the world economy which was US$30 trillion during that period. Risk averse investors are agile, but believe in operating in a stable and predictable environment free of perceived and real risks of corruption and consumer conflicts that enable people to receive reliable and cost effective services in Africa. Therefore, without MIGA’s risk insurance against such perceived and real risks, most investors are reluctant to participate in the water supply services in Africa.
This article discusses how MIGA should enable private investors to particpate in the delivery of water supply services to poor consumers in Africa. It recommends that the agency (MIGA) expand its coverage to protect private investors from corruption and consumer risks, two of the most prevalent risks in global water supply services projects and investments in Africa. It also proposes that MIGA develop and implement DDRA strategies as a precondition to providing corruption and consumer risk insurance coverage to water private investors. MIGA should also require that private investors seeking MIGA's non commercial risk insurance guarantees for investing in African water supply services develop and implement DDRA as a precondition to receiving such guarantees.